A Few Bad Apples?

An Exploratory Look at What Typical Americans Think about Business Ethics Today

A report from Public Agenda for The Kettering Foundation

Executive Summary

A Few Bad Apples? is a collaborative effort on the part of The The Kettering Foundation and Public Agenda to learn more about Americans’ views on the ethics and behavior of corporate America today. The research also seeks to shed light on the similarities and gaps between the attitudes of typical Americans and high-level executives who are most knowledgeable about our nation’s companies.

Public Agenda convened a series of six focus groups with the general public and conducted more than a dozen in-depth interviews with business leaders from major organizations in America today. In addition, we held one-on-one discussions with industry observers from government, the non-profit sector and the press. The research covered a wide range of business topics—executive compensation, employee and customer relations, financial management, layoffs and corporate citizenship, to name a few. It also elicited powerful underlying concerns about declining values and increasing greed that both business leaders and typical Americans see as widespread throughout society.

The ordinary Americans and business leaders interviewed in this research generally approached the issue of business ethics from very different starting points. The focus group participants mostly spoke from the perspectives they knew best: as employees or customers. The business leaders naturally spoke from the perspective of managers and decision-makers. Business ethics did not appear to be a top issue of concern in the focus groups with ordinary Americans, and it was apparent that most were engaging this topic for the first time. In contrast, business leaders were knowledgeable and passionate about business ethics and very engaged in the interviews.

Highlights of the Findings

I. Outrageous Fortune

For participants in these focus groups, the most egregious violators of business ethics were corrupt executives who protected their own wealth while driving their companies to bankruptcy and forcing employees out of jobs. Enron was the example that elicited outright anger. In sharp contrast, most participants did not resent rewarding executives handsomely for having great vision or for building a thriving company.

The business leaders we spoke with, not unlike the focus group participants, strongly believed that executives who committed the most egregious crimes should be punished to the full extent of the law. Business leaders, however, stressed that not every corporate misdeed was illegal and worried that every minor infraction could lead to a “perp walk.” They had more nuanced views about executive compensation, but some did feel that executive pay was out of proportion.

II. “G” for Greed

Participants in these focus groups offered a consistent diagnosis for the cause of recent business scandals: greed for money and power and a weakening of personal values. They rarely referred to problems such as excessive competition, the regulatory environment or weak corporate governance. For the most part, most participants had only a rudimentary understanding of these things anyway.

Both the business leaders and the ordinary Americans we interviewed for this research consistently pointed to basic greed and a general erosion of ethics and morals in society as the principal cause of recent business scandals. But business leaders also talked about the tremendous pressure they were under to show profits, which some said could lead the “ethically vulnerable” to take questionable short-cuts. Business leaders were far more knowledgeable about potential solutions that involved changes to government regulations and corporate structure.

III. From Business Scandals to Jobs, Jobs, Jobs

In focus groups, people defined business ethics in broad terms. Inevitably, conversations about recent scandals or questionable business practices quickly morphed into conversations about job security and whether companies treated employees and consumers fairly. Their main interest was not what’s best for a particular business or for the economy as a whole. They most often spoke directly from their own perspective as employees or customers.

Business leaders did not talk about saving jobs in moral and ethical tones the way the public did. According to many of the leaders we spoke with, a CEO’s primary responsibility was to shareholders, and layoffs were simply seen as an inevitable part of doing business. Nevertheless, both groups believed that there was a right way and a wrong way of handling layoffs. Both also agreed that companies who gave back to their communities—good corporate citizens—engendered the public’s good will.

IV. Don’t Expect Them To Be Angels

Based on these focus groups, the current scandals do not seem to have produced a systemic cynicism about business overall. Many participants thought it was possible for executives to be both ethical and successful. And they did not expect business people to be naďve pushovers or saints. When it came to the Martha Stewart insider trading scandal, many participants admitted that they were not sure if they would have behaved differently had they been in her shoes. Small businesses, many said, tend to behave more ethically.

The business leaders in our study strongly felt that CEOs had lost a great deal of public credibility and respect, and they were cognizant of the need to restore the public’s trust. At the same time, virtually all leaders believed that the vast majority of business executives were ethical, and many protested that just a few bad apples were ruining their collective reputation. They were more sensitive than the public to the limits on a CEO’s ability to control day-to-day company operations. None commented on the relationship between ethical behavior and company size.

V. The Enemy Is Us?

Focus group participants seldom discussed their own power to influence the ethical behavior of companies, whether as voters, investors, employees or customers. It quickly became clear in the focus groups that ethical considerations seldom intruded on people’s purchasing or investment decisions.

The business leaders were more attuned to the power of public opinion and consumer behavior to influence corporate deeds than the focus group participants were. Still, as previously mentioned, both groups believed that the public preferred to patronize companies that are civic minded and give back to their communities.

VI. Who’s Minding the Fourth Estate?

For the most part, focus group participants did not regard the media—or the financial press in particular—as vigilant watchdogs protecting the public interest. Some thought the press served a useful purpose putting a spotlight on corporate misdeeds, but discussions about business coverage quickly shifted to broader conversations about shallow or biased coverage in general. The negative judgments about the business press reflected an overall assessment of the faults of the media in general.

Media coverage of recent business scandals was a prominent topic of conversation in the leadership interviews, in contrast to the focus groups with the public where it did not generate extensive discussion. Business leaders held diverse opinions about the financial press; some were satisfied with the coverage, others thought it was exacerbating what was actually a limited problem.

Different Starting Points: A Re-Cap

Among the most important observations emerging from A Few Bad Apples? are the differences in the way business executives and members of the general public think about business ethics. Below is a quick review of the major differences:

Business ethics did not appear to be a top-tier issue in the public’s mind. That’s not to say it’s not important—the people we interviewed voiced strong sentiments in some areas. But the conversations did not have the staying power or specificity of other issues Public Agenda has worked on such as education, health care or welfare reform. In contrast, the business leaders were passionate about the topic and very engaged in the interviews.

Compared to business leaders, people in the focus groups tended to have a broader definition of what ethical business practices meant. For example, they believed protecting workers from layoffs was a crucial moral consideration. Virtually no business person we interviewed framed layoffs as a moral issue.

With the exception of hands-on investors, most focus group participants were unfamiliar with the governance structures of companies or the details of how business practices are regulated. It was apparent that most were engaging in this sort of discussion for the first time. Among business leaders, the knowledge base was considerably more nuanced and sophisticated. The law and regulatory environment, as well as the history of past reforms, were at their fingertips.

The most natural way for people to engage this issue was through archetypal examples, stories that captured and encapsulated the good and the bad of business ethics. Enron, Martha Stewart and Bill Gates were especially useful reference points that guided and sparked the conversations. This was apparent in both the general public focus groups and the leadership interviews.